Post 1 - process behind the payback method is that the...

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What types of firms or projects might want to use the Payback method as a means of project evaluation? Would the Payback method give an appropriate answer? Hi Professor and class, The payback method is sometimes used in industries where products become obsolete very quickly, such  as consumer electronics (i.e. computers, Televisions). Since products may last only a year or two, the  payback period on investments must be very short. The  payback method  focuses on the  payback period The payback period is the length of time that it  takes for a project to recoup its initial cost out of the cash receipts that it generates. This period is  sometimes referred to as" the time that it takes for an investment to pay for itself."  The basic thought 
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Unformatted text preview: process behind the payback method is that the quicker the cost of an investment can be recovered, the more desirable the investment. The payback period is expressed in years. The payback method is not a true measure of the profitability of an investment. Rather, it simply tells the manager how many years will be required to recover the original investment. Unfortunately, a shorter payback period does not always mean that one investment is more desirable than another. You would have to look at the return on investment from one investment to another and the risk involved References Zuashkiani, A., & Jardine, A. S. (2010). Coming full circle. Industrial Engineer: IE , 42(4), 44-49. Retrieved from EBSCO host ....
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